Triangle Petroleum (NYSEMKT:TPLM) is a name we've only just recently followed. But after hearing about the unique financial and operating structure at the company and after investigating just how far the E&P's equity has fallen, we were immediately interested in taking a deeper look into the fundamentals. We're always interested in a good stressed equity story. What we found was both interesting and potentially profitable.
As Triangle Petroleum has become more and more stressed -- with the majority of the stress being put on its model over the last 12-15 months -- its story has become more interesting. But interesting isn't always a good thing for shareholders. It certainly hasn't been for Triangle Petroleum shareholders so far.
Over the last 52 weeks, Triangle Petroleum shares have fallen from ~$6.50 to ~$0.40. Yes, this is primarily the result of precipitously falling oil pricing. Yes, there is absolutely nothing Triangle can do to change this all-important, viability determining variable. Yes, this matters greatly. Still, even pointing out this obviousness, we see no reason why Triangle's share price can't be "righted" over the coming quarters. In that, we've provided a "road map" of events that would be considered productive in our assessment.
We advise those holding exposure to Triangle Petroleum to use our "road map" as a barometer of overall model health and viability. While we're not advertising the impending doom of the E&P we do want to be very clear that the stress on the model could become much greater over the next quarter or so without execution. Uniquely, although becoming more and more commonplace by the day, this pressure could be fundamental-based or even technical-based.
If Triangle Petroleum shares fall to $0.15, which would trigger an automatic and immediate delisting from the NYSE, we would consider that an immediate elimination of long-side consideration for this name (this is something we've guided clients through for several other recent energy tickers). We would also consider trading substantially near that price as a warning sign to sell down exposure (even if that meant selling at near a catastrophic loss). For recent examples of this technicality (in execution rather than in theory), we would direct your attention to SandRidge Energy (NYSE:SD) (OTCPK:SDOC), Magnum Hunter (MHR) (MHRC) (OTCPK:MHRCQ), Penn Virginia (PVA) (PVAH), etc.
Going forward we'll be opening up regular coverage of Triangle Petroleum for clients and also -- in limited capacities -- for freemium users of our blog. Our priority coverage, 1:1 consultations, as well as any unique ancillary information that we can source as a result of our network's reach will only be provided to premium clientele. Existing clients following some of our other premium tickers know just how valuable this information can be to risk managing a particular narrative.
That said, we believe the following deck is an excellent "road map" for risk managing a Triangle Petroleum position. We believe that we summarize the real-time narrative as of the most recent close and that we present both the current risk picture as well as a dynamic road map for tracking overall structural stress levels at the E&P. The hope for those still long this name is that the E&P can successfully destress.
Again, we've provided a comprehensive breakout of what investors should be looking for Triangle Petroleum to accomplish and what model stress-indications any progress might negate. Tracking this changing equation of risk and long-term potential is going to be paramount in knowing when to hold position, when to add to position, and when to exit position -- even if at a near-catastrophic loss. Triangle Petroleum, despite our overall bullishness and our overall optimism, still has real risk of continuation of loss.
(Be especially careful with the trading technicality folks, we've seen it destroy an incredible amount of value so far into this commodity bear.)
Disclosure: I am/we are long MHRCQ.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I have recently consulted on SandRidge Energy
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.